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Sunday, September 25, 2022

2nd Biggest Bank In Country Will Fire 5000 Employees To Cut Costs: 10% Workforce Will Be Terminated

Credit Suisse may cut around 5,000 jobs, about one position in 10, as part of cost-cutting measures.

Tough times

The scale of the potential firings reflects the challenge facing Credit Suisse and new chief executive Ulrich Koerner, who seeks to restore the brand after a string of scandals.

Koerner, promoted to CEO just over a month ago, has been given the task of paring back investment banking and cutting more than $1 billion in costs to help with recovery.

The bank has been beset by a tumultuous two years marked by huge losses, a rare court conviction and a 40% plunge in its shares.

The conviction had to do with its failure to prevent money laundering by a Bulgarian cocaine trafficking gang which the company is appealing against.

Revamp urgently needed – The lender is facing increasing pressure to turn around the business and improve its financial resilience.

Koerner’s strategic review, the second in less than a year, will evaluate options for the bank, while reaffirming its commitment to serving wealthy customers.

The company gave no response beyond repeating that it would give an update on its strategy review with its third-quarter earnings and that any reporting on outcomes was speculative.

Credit Suisse has dubbed 2022 a “transition” year with a change of guard, restructuring to curb risk-taking in investment banking and bulking up wealth management.

Subject to change

The Zurich-based bank has dismissed rumors that it could be bought or broken up.

The discussions surrounding job cuts are ongoing and the number could still change.

However Swiss newspaper Blick earlier reported that more than 3,000 jobs would be cut.

Credit Suisse has already said it will cut costs below 15.5 billion Swiss francs ($15.8 billion) in the medium term, versus an annualised 16.8 billion francs this year.

Andreas Venditti, an analyst with Vontobel, said that cost cutting is the easiest immediate step it can take.

However this isn’t a strategy since it can end up in a vicious circle, where jobs are cut, service declines and customers leave.

Betting on China

He pointed out another dilemma- that should restructuring costs run into the billions, the bank may also need to raise more capital.

Deutsche Bank analysts estimate that it may need to raise capital by 4 billion Swiss francs to shore up its buffers and fund the revamp.

However all is not lost yet, it expects an improvement in its fortunes by betting big on China and plans to launch a wealth business there next year.

 

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